Monday, May 28, 2012

SHAH ALAM (May 28, 2012): Kelington Group Bhd, which has seen its revenue grow at a compounded annual growth rate (CAGR) of 38% from 2003 to 2011, expects the growth momentum to continue through 2012, backed by strong order inflow and growth opportunities in the emerging light-emitting diode (LED) and bioscience industries.

Its group president and COO Steven Ong Weng Leong said the group, one of the country's largest ultra-high purity (UHP) gas and chemical delivery systems providers, is bidding for RM400 million worth of projects in Malaysia, Taiwan, China and Singapore and hopes to book some RM100 million from these tenders this year, based on past success rate of 25%.

This would be in addition to its RM72 million new orders already secured.

According to TA Securities, 2012 will be another record year for Kelington. It expects the group's revenue to reach RM165.2 million and RM191.9 million in its financial years ending Dec 30, 2012 and 2013, while net profit is expected to increase to RM10.4 million and RM12.2 million, respectively.

Kelington posted a net profit of RM8.7 million on revenue of RM139.7 million for FY11.

"The wafer industry is currently the largest revenue earner for the group, followed by the solar and thin film transistor liquid crystal display (TFT-LCD) industries. However, we see the bioscience and LED industries emerging as an important revenue source," Ong told SunBiz in an interview.

He said demand for advanced UHP delivery systems, which are widely used in the semiconductor industry, will continue to be strong as long as technological advances continue.

"As computer chipmakers like Intel continue to build new chip manufacturing plants or upgrade existing ones, there will be requirements for UHP gas and chemical distribution systems. This bodes well for Kelington," he added. The same goes for the TFT-LCD industry.

"(The development of) our UHP delivery systems will also have to follow their pace. In this regard, we have a technology advantage (over our competitors) by having Linde Group and Lien Hwa Industrial Corp of Taiwan as our shareholders via Sky Walker Group Ltd," said Ong.

Sky Walker holds 12.2% in Kelington, with Lembaga Tabung Angkatan Tentera holding another 12.6% and Palace Star Sdn Bhd 47.5%. Palace Star is owned by Ong and Kelington group chairman and CEO Raymond Gan Hung Keng with a 27% stake each and Lim Hock San (who is not involved in the management of Kelington) the remaining 46%.

The group is also looking to newly-acquired Puritec Technologies (S) Pte Ltd of Singapore to help penetrate the bioscience market there as well as bring in new sources of income. In February, Kelington acquired Puritec for S$2.1 million (RM5.1 million).

"The acquisition allowed us to extend our services to cover the entire value chain of a UHP delivery system. We expect Puritec to start contributing to the group's earnings, albeit in a small way, this year and make a significant contribution from next year," Ong added.

On the potential revenue contribution of Puritec, Gan cited a major competitor in Singapore, which currently captures a 70% share of the market there and generates about S$60-70 million in revenue each year.

"If we can capture 20% of this amount when Puritec is fully matured in three years, you can see how much its contribution to the group would be. And this doesn't even factor in contributions from other markets," he said.

Gan said the group is also looking to venture into new markets and has started exploring Vietnam, Indonesia and the Philippines.

"However, we will only set up our base there when the (semiconductor) industry kicks off. Until then, we are keeping these markets on our radar screen," he added.

With net cash of RM23 million as at Dec 31, 2011, Gan believes that Kelington is trading at a lower than average price-to-earnings ratio of 8.6 times compared with its listed peers – Wholetech System Hitech Ltd in Taiwan and Hanyang Engineering Co Ltd in South Korea of 14.8 times to 10.5 times, respectively.

Kelington shares were last traded at RM1 on Friday, giving a market capitalisation of RM79.6 million.

So much promise eh?

Let's refer the underlined points mentioned in the article.

grow at a compounded annual growth rate (CAGR) of 38% from 2003 to 2011, expects the growth momentum to continue through 2012

bidding for RM400 million worth of projects in Malaysia, Taiwan, China and Singapore and hopes to book some RM100 million from these tenders this year, based on past success rate of 25%

RM72 million new orders already secured

According to TA Securities, 2012 will be another record year for Kelington. It expects the group's revenue to reach RM165.2 million and RM191.9 million in its financial years ending Dec 30, 2012 and 2013, while net profit is expected to increase to RM10.4 million and RM12.2 million, respectively

Kelington posted a net profit of RM8.7 million on revenue of RM139.7 million for FY11

With net cash of RM23 million as at Dec 31, 2011, Gan believes that Kelington is trading at a lower than average price-to-earnings ratio of 8.6 times compared with its listed peers

Kelington shares were last traded at RM1 on Friday, giving a market capitalisation of RM79.6 million

There is an impressive CAGR, lots of job bids, lots of orders secured, record profits, net cash, much cheaper compared to other listed 'peers'...

So good eh?

Now I saw Kelington reporting its quarterly earnings report last Friday. Why no mention of the earnings?

Well here's the bare numbers...

A net profit of 802 thousand only!

How?

Do you feel the disconnect between the article and the numbers posted by Kelingtion?

6
comments:

I think this stock have a very big fluctuation between the quarters. A check in the past earnings of the company reveals that the company has a typically bad first quarter and it improves as the year goes.

Keano: You might be correct and if you would have noted the comments I made on the footnote "ps: I have no idea if this is a good stock or a lousy stock."

The point that I want to make is the disconnect between the article and the actual performance.

Such a long artice written on it with so much facts and figures supplied BUT yet the article failed to mention HOW the stock did for its most recent earnings, earnings which was announced just on Friday.

Surely, a one line comment would have been more than enough, right?

For example, I was initially interested. Sounded so interesting. Then when I look at the quarterly earnings... err... a net profit of only 802 thousand only? I went huh?